Recent data from the Insurance Bureau of Canada (IBC), drawing on statistics compiled by both Statistics Canada and the IBC itself, highlights several key factors influencing the rising costs of home insurance across the country.
Cecilia Omole, the IBC’s policy development manager, emphasized that escalating costs associated with rebuilding and repairing properties, coupled with the heightened frequency and severity of natural disasters, are major contributors to the increased expense of home insurance.
Over the period since January 2019, home replacement costs—which denote the expenses to entirely rebuild a house—have surged by 23%. Concurrently, homeowners’ maintenance and repair expenditures have risen by 18%, surpassing the rate of core inflation during the same timeframe .
Of notable concern, residential building construction costs have skyrocketed by an astonishing 61% since January 2019, significantly outpacing the broader inflation rate. This dramatic increase has far-reaching implications extending beyond the realm of home insurance .
Omole identified these factors as persistent drivers of escalating insurance costs, even amidst indications of easing overall inflationary pressures. Additionally, the increasing severity and frequency of natural catastrophes, both domestically and globally, continue to exert substantial pressure on insurance costs.
In 2023, for the second consecutive year, Canada experienced insured damage exceeding $3 billion from natural catastrophes and severe weather events. Nationally, insured losses from severe weather events totaled over $3.4 billion that year, with five of the most financially devastating years in Canadian history occurring within the past eight years (2016, 2020, 2021, 2022, and 2023), adjusted for inflation .
The bulk of these natural catastrophe-related claims and insured losses—approximately 60%—stemmed from home insurance claims. Before 2016, the annual average losses for personal property due to natural catastrophes were around $990 million, with an average of approximately 57,000 claims per year. However, between 2017 and 2023, annual average personal property losses surged to approximately $1.55 billion, with around 89,000 claims per year, representing a 56% increase in annual average losses .
Omole further highlighted that escalating reinsurance costs, driven by heightened global catastrophic risk, have exacerbated inflationary pressures in Canada. This trend has been particularly acute in regions like California, Florida, and certain parts of Canada .
In the face of these challenges, Statistics Canada data underscores persistent demand for trades helpers and labourers in the construction sector, crucial for timely completion of home repairs and rebuilds after insurable losses occur.
However, the construction industry is poised to face significant labor shortages in the coming years. A March 2024 report by BuildForce Canada projects a shortfall of 85,500 workers by 2033, as retirements outpace the rate of new entrants into the field .
These converging factors underscore the complex landscape driving up home insurance costs in Canada, presenting significant challenges for insurers and homeowners alike.
